Liberty Media has several tracking stocks. Sirius XM investors are becoming more familiar with the concept of tracking stocks ever since Liberty bailed out Sirius XM in the eleventh hour a year ago. The Sirius XM deal worked out quite well for Liberty. They guaranteed debt, acquired a 40% stake in the company via preferred shares, and on top of that own a lot of the debt Sirius XM has on the books.
Another company Liberty Media is invested in is Live Nation (symbol - LYV). Live Nation sells concert tickets, a business which has been under pressure over the last year or so. Ticket sales are down 4% so far this year, and partly due to the waiving of some fees, revenue is down 9%.
Last Thursday, July 15th, the Live Nation Stock took an 11% haircut. That steep downward pressure was followed by another 8.7% on Friday the 16th. The 52 week high is $16.90 and the low is $5.00. Live Nation stock currently sits at $8.99, down from about $11.50 not long ago. That is a 20% drop.
Does the news of a loss of 9% in the revenue line justify a drop of $2.50 (20%)? It will be an interesting play for investors to say the least. In my mind the stock has taken a bigger beating than it deserved, but as we all know, anything can happen. In this economy concerts seem to have been one aspect of entertainment that has suffered. Concerts cost a lot of money, and people simply are not parting with their dollars at this time.
Liberty, for their part still holds a position in Live Nation, but they recently announced that they are spinning off some of their tracking stocks. The news brought some speculation that this issue may somehow impact SIRI. Likely, there will be no impact whatsoever. Liberty as a company is very very stable, and they have many options available to them prior to converting preferred shares of SIRI. Additionally, the spin-offs are not anticipated to be completed until the end of the year. This should give all stocks (such as SIRI and LYV) in Liberty's tracking plenty of time to digest the market, and will also allow Liberty some latitude in the final make-up of the various tracking stocks.
Liberty is known for looking for deals that encompass all stock transactions. Such deals do not carry immediate tax implications.
Position - Long Sirius XM, No Position Live Nation or Liberty